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House Calls For Hearing On Stock Market "Glitch"
Lucas123 writes "The House Financial Services securities subcommittee plans to hold a hearing next Tuesday to examine what caused the US stock market to plunge almost 1,000 points in a half hour Thursday, and it called on the SEC to investigate possible problems with computer algorithms that may have exacerbated a human order-entry error and led to the precipitous drop. 'Reports have surfaced that much of this movement was potentially as a result of a computer glitch,' Committee Chairman Kanjorski said. 'We cannot allow a technological error to spook the markets and cause panic. This is unacceptable. In this day and age and with the use of such complex technology, we should be able to make sure that our financial markets are effectively monitored and investors are protected.'"
I'm sure the SEC will be closely examining all "footage"
I mean.. they *have* the logs, i hope. I mean they *have* some software anyway which does data-mining to analyze for unusual things....
It doesn't take a subcommittee hearing to figure out that people are finicky and the system is remarkably fragile.
Wall Street sits there.
Nothing gets done.
And in this case, I don't there's really anything to be done. It was a mistake that was corrected and if anyone was hurt, it was Wall Street traders and the only thing I have for them is this nano-tech violin.
If you had your mutual fund or individual stocks, it really didn't affect you.
RIP America
July 4, 1776 - September 11, 2001
Seriously, I bet nothing went wrong. If there are more sellers in the market than buyers the price drops. Automated trading will dump stock into a falling market in a stop loss situation which is what is designed to do. Perhaps they want to go back to a paper based system where people have to place orders in person? Will this affect supply and demand?
Cancel or Allow?
"we should be able to make sure that our financial markets are effectively monitored and investors are protected".
New York, concrete jungle where dreams are Madoff.
"Kill 'em all and let Root sort 'em out"
in b4 "socialism"
The world got to see the reality for a short time and then went back to sleep
http://www.zerohedge.com/article/day-market-almost-died-courtesy-high-frequency-trading
http://www.bloomberg.com/apps/news?pid=conewsstory&tkr=C%3AUS&sid=agW5_B0D1z9M
"CME Group Statement on Today's Market Activity:"
"does not appear to be irregular or unusual in light of market activity today"
Domestic spying is now "Benign Information Gathering"
"This is unacceptable. In this day and age and with the use of such complex technology, we should be able to make sure that our financial markets are effectively monitored and investors are protected." ... because protectig investors is more important than protecting the economy.
Brazil's market stock has a "kill switch" that turns off trading in cases such as these. If the stocks take a nose dive because of a computer glitch or
because of a human typo, the kill switch automatically closes the market for that day.
That would be a great feature to add to our stock markets here in the US.
WSJ is reporting that the trigger was a very large sell order for P&G coupled with unchecked computer trading and some inherent flaws in the current system of fragmented exchanges.
Felix Salmon also did a good explanatory post that pulled in work from other writers about what might have happened and why.
Mr. Salmon's post links to a thought provoking post by a blogger named Kid Dynamite, who posits that it's a really bad precedent to cancel the erroneous trades because it lets the program traders off the hook for the consequences of their computer mess-up.
*Much* easier to buy on those dips when you can induce the dips with software. Shares dropped to a penny? I'll take a million please!
Please do not read this sig. Thank you.
Who decides that? And what happens to a smart invester that buys stock at $0.01 that usually trades at $40, to quickly later sell it at $30? Will the $0.01 buys be cancelled, but the $30 sells not be cancelled? But that would leave you with a short position, having to buy them back at $40. May be very expensive.
The SEC tried to get the guy who made the error to testify, but they'd already fired him, so he was not in the mood to cooperate.
In a statement the guy declared "I'm going into politics".
All's well that ends well.
Follow the money. SOMEONE made money, it sure as hell wasn't me.....
Is it mere coincidence that the Senate planned for a vote to break up the big banks on the same day?
This was just a little reminder than the "economy" is nothing more than a shared mass delusion. It has nothing to do with actual value or usefulness.
Wake up.
The scenario: 1) The European markets were tanking, and also 2) Algorithms were running out of stocks to push higher.
Algorithms do something like pushing stocks with the higher betas ( more volatiles ). To influence the markets, algorithms must keep tracking and actuation constant across all the Markets. This means they can control Nasdaq (the rest of the markets will follow) via apple, therefore AAPL being pushed so higher lately, but this formula has become riskier since the price of AAPL is becoming riskier for investors. So the market manipulator(s) are thinking of new strategies to keep people safe buying stocks ( this is part of what they call "doing gods works" ).
My thesis is that there were too much people with long positions already and the markets became expensive. To keep markets going up it is needed a constant flow of buyers, and the VIX ( the index that measures market volatility ) was loosing steam, no one was buying stocks anymore. Also the responsible for this probably wanted to get rid of the pricey stocks it was holding (sell high), since it knowns that the stocks were being pushed by algorithms that runs on taxpayer money.
So these guys have to create risk and force people to sell, in order to maintain volatility and keep people coming. So what do they do ? they force stop loss positions all over the place. This forces people to sell, and make VIX go up alot. The excuses like the one of the fat finger pressing m / b , or others will give the clearance to people to re-buy they already expensive stocks.
So the argument being offered by or worthless President and his cohorts of blowhards on Capitol Hill appears to be something to the effect of:
The market should not move that fast because it means people are speculating on various herb behaviors and looking to turn quick profits by being on one side or the other of a brief out sized move; rather than speculating that a company has better ideas, management, and more desirable products then others and is more worthy of investment.
I have problems with this. Firstly nobody should have money in equities they can't afford to lose ever! Equities even by the definition Obama and friends seem to like are for growth; and growth almost always implies risk. Money you can't afford to lose belongs on deposit at an insured bank. The rest in dept instruments like bonds, which offer varying degrees of growth and risk and its usually possible to quantify the downside unless the government steps in and gives you a screw job. Remember the real criminals, the ones truly breaking the rules on Wall Street are in Washington. Equity investing is a gamble always has been and was always supposed to be.
Automated trading does not do anything humans did not do on paper before; going all the way back to when traders shouted at each other on soap boxed from the street corner swapping the certificates right there on the spot. It just does it much faster. People did program these rules you know the computers are just following them. The rules also make sense. If stock you own is tanking in way that it appears its headed for zero you very well might want to unload it while you can. This happened in the old days too; there are plenty of wood cuts depicting the frenzy on the corner of Wall Street.
The market can shed eight or ten percent and gain it all back in the course of a few weeks; most don't complain when that happens.
Repeal the 17th Amendment TODAY! Also Please Read http://www.gnu.org/philosophy/right-to-read.html
Let's be sensible here. Stock should (big should) represent the value of a company based on its market value. If a company's doing good, its stock should be valuable because it's backed by the market strength of the company represented.
Thus such a "glitch" should have little effect. But it has incredible effect. Why? Because stock values are horribly inflated. Still, even after the bubble allegedly popped. We're still heaps over value. Have been for quite a while now.
We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
The assumption of an "honest" error, that is; who is to say that the market isn't being routinely manipulated, and somebody goofed the size of the planned "bump"?
Orwell: "In a Time of Universal Deceit, telling the Truth is a Revolutionary Act"
This is unacceptable. In this day and age and with the use of such complex technology, we should be able to [yadda yadda]
Well, if the technology wasn't complex at all, there would hardly be room for errors such as this, now would it?
It should be interesting to see what the result of the inquiry might be. It seems to me that the trading system was designed principally to assure fidelity in tracking the monetary transactions and far less so to secure the system. It's quite plausible that the "glitch" was an intentional manipulation of the market as a "proof of concept". Forget nuking New York, if you could effectively render the financial markets inoperable, or even more subtly manipulate them, you'd have a lot more control over the now largely corporate US government.
from the little bit i know about investing, the big picture is intended to be a long-term, i.e. year-long or decade-long, activity. one high volatility event that lasted for a few hours should barely be an asterisk.
"To stop the terrorists."
Games have rules, strategies, inspectors, and punishment too. Nobody wants to admit it, but these markets are full of shams at all levels -- "legislation and regulation" is just enough to keep the whole game from collapsing, not to make it honest. These "glitches", "crashes", and "abuses" provide occasional glimpses of a not-so-welcome, much deeper iceberg reality. End naive belief, and see overall it's unsustainable long-term, as more profit and waste comes out, and less rational, productive labor goes in. It's not work, economy, and productivity for years, just money gaming. Play according to greed and ability. Enron, Arthur Anderson, Madoff, "subprime" investors, etc were caught in their bluff, but many, many others continue just fine, thank you. But don't let the masses discover it has no foundation, or they will pull out what holds it up - their belief it it, which deposits follow. But marketing works wonders, and the show goes on. Until the structure collapses under it's own weight, or there is no money in the world left to keep pumping in. In the 'cold war' there were two sides, not really so different. One fell under it's own weight of lies. The other stands, so far. With no "social superstructure", there will still be human beings, and their minds and abilities, good or not.
Build your own energy sources from scratch. http://otherpower.com/
I suspect this is another one of those cases where the customer (government) wanted all kinds of features and monitoring but started to cut corners when it came with a price tag. It's amazing how little gets accomplished when the customer wants the pie in the sky features and doesn't realize it costs money.
Yes, I realize this works both ways. It could be that the requested monitoring and features were priced outlandishly by the contractor. In the end, everybody loses. All in all, I'm not going to hold my breath that whatever "technological error" produced this situation will get corrected. I fully expect it to be swept under the rug.
How come nobody complains when the market makes a dramatic rise? People just always want someone to blame when things go bad (someone other than themselves). I can't wait to see the senate hearings /insert sarcasm here/ and watch the senators huff and puff and act like they actually know something about finance.
Perhaps someone who knows more about stock trading can help me understand:
1) TFA states that someone made an input mistake and sold 16 billon Fortune 500 stocks instead of 16 millon. Did he have that many to sell? How big a player do you have to be to be able to make these type of mistakes.
2) TFA states that at one point shares for some companies dropped to a mere penny and then rebounded. Were people able to take advantage of the sudden drop to sweep and get a fast couple of millons due to the glitch?
And in conclusion: Does the system's inherent frailty allow this type of event to be orchestrated in order to make a big profit, or a new type of terror attack?
As a Slashdot discussion grows longer, the probability of an analogy involving cars approaches one.
Is there a single member of Congress with a Finance degree? Do any of them have a clue how the market is supposed to work? Are they going to do something that will have a positive influence?
Of course not!
Just a way to look like they are doing something in an election year.
If they were serious about the real problem they would balance the budget.
Professional Politicians are not the solution, they ARE the problem.
What if you did buy a bunch at an insanely cheap price, the stock bounces back up and you make a mint, then the regulators come in and say "Sorry we're canceling your order". I'd be pissed - and suing!
Oh wait, there already doing that with humans ready to sell and buy ...... but who wants you to know that?
http://www.spiegel.de/international/europe/0,1518,676634,00.html
http://www.pbs.org/wgbh/nova/transcripts/2704stockmarket.html
Officer B. Madoff will show up if you call 911 about it.
If you were subtle about it, spreading out your trades and not hitting the ones with the highest differentials, you could exploit this hack for a long time.
Please do not read this sig. Thank you.
Just put in XX hours of lag on the trading on stocks. The daytrading bring nothing positive to the companies.
- To understand recursion, we must first understand recursion -
This is just a diversion so that those with money invested have time to get that money out before the majority of investors wake up and realize there are huge real problems. The Greek economic crisis is just a taste of the problems to come as developed economies have taken dangerously high proportions of debt to bail out their banks.
The bankers run everything. /paranoid rant
"You people on Wall Street are ruining the economy and cheating people!"
Wall Street Trader screams back : "No Sir! YOU POLITICIANS ARE RUINING THE ECONOMY!"
Wall st plots a failed coup attempting to bribe a few senators and spies. Congress shuts down several corporations, has police arrest executives, who mysteriously disappear the next day, as well as a few senators. Security contractors secure corporation offices, which return to functioning. Newspapers align with corporations and publish numerous humiliating stories of non-corporate senate and congress members in an attempt to discredit and force them out. National Guard barricade, corporate buildings, order military security contractors to stand down, unsuccessfully. Offshore tax haven nations accept executives request for asylum, offers citizenship, government positions and security. Barge with trucks loaded with helicopter parts and unspecified munitions seized by the Coast Guard departing from Florida, crew found to be employed by Lockheed Martin. Shots fired, two coast guard officers and four suspected corporate smugglers dead in the confrontation. Military contractors set up communications center in Union, NJ to coordinate media and security against terrorists, secure services of unnamed contractors, military helicopters observed on location daily. National Guard tear gas barricaded corporate "employees", find they are merely young people posing as employees, buildings are empty. National Guard, with Army reinforcements, takes over national communications infrastructure for emergency communications, announces curfew, warns population of rogue elements carrying weapons in workplaces in NY and NJ. Barricades are seen in tunnels and bridges. Markets fluctuate wildly, gaining and losing daily. Canada and Mexico send diplomatic teams to mediate conflict. "Missing Person" signs and stories begin to appear frequently, quickly addressed by both governments and corporations. Roads and airports out of the country are full. The United Nations sets up 'complementary' offices in Montreal, and meetings take place there. Manhattan's East Side becomes a ghost town. People trade underground newspapers and DVD's in cafes and street corners, with dozens of unconfirmed stories, such as distant government and corporate military bases, prisons, murders, disappearances. Some government and corporate offices are abandoned, some barricaded and off limits, some operate normally. Stories of terrorists attacking governments and corporations are always in the news. Culprits are always arrested quickly and confess. All are foreigners and operated alone or with foreign support. Washington DC and NYC have frequent subway and train maintenance
Build your own energy sources from scratch. http://otherpower.com/
It's called greed, or deregulation ..
The stock buyers and sellers should be able to do whatever the heck they want to. Congress getting involved over a company making a mistake in its buying/selling orders is a bad sign.
As someone once said, "If you look around the table and you don't spot the mark, it's you."
If Slashdot were chemistry it would look like this:Cadaverine
I wonder whether the synchronous-counter approach would help reduce glitches here. In other words:
- at HH:MM:00 update the prices (and allow the change to propagate; everyone can put in their next trade order)
- at HH:MM:30 execute the trades (and then there are 30 seconds to decide on the new price before a value is propagated)
This is the way that synchronous logic works. The current model is more like hundreds of ripple-counters.
(It would also ensure slightly greater fairness by not giving an advantage to the person with the absolutely fastest network connection, and would slow down the cycles so that a market collapse took many minutes.)
http://online.wsj.com/article/SB10001424052748703338004575230440147772822.html?mod=WSJ_hpp_LEADNewsCollection
How much you want to be the "solution" involves even more convoluted code layered on top of the already convoluted code to solve the problems?
In this day and age because of the use of such complex technology,
There, fixed that for ya.
Any sufficiently advanced intelligence is indistinguishable from stupidity.
Who is to say that you mom isn't being routinely buying crack for sex, and somebody goofed the size of the planned "bump"? ;)
P.S.: You are employing Glenn Beck “logic”. Please don’t.
Any sufficiently advanced intelligence is indistinguishable from stupidity.
Why so serious?
It's getting closer to a time when the entire world economy collapses due to a chained event in the stock markets that wipes out all this virtual equity and maybe then people will start considering a ban on this legalized form of gambling that is today's stock market. Stocks change positions these days based on rumors and lose equity due to glitches and nobody really understands what real equity exists in these companies that are being traded because it so convoluted and vaporous.
We need a Butlerian Jihad against Stock Markets! - (Dune)
This just in: a transcript from the hearing:
Congress: Little Timmy, did you break the vase?
NYSE: No mommy it wasn't me!
Congress: I know it was your little Timmy!
NYSE: But I didn't mean to! It was an accident!
Congress: GO TO YOUR ROOM LITTLE TIMMY AND DON'T COME OUT UNTIL YOU'RE READY TO APPOLOGIZE
NYSE: *sob* okk
I SAID IT earlier, this is High Frequency Trading that drained the market out of all liquidity in seconds, that's what it does.
Don't need a congressional hearing on this, it's simple: HFT computers caused this, not any fat fingers, it's a systematic problem with the US market and it will happen again, just hope next time it happens it doesn't suck ALL money from all speculators and investors who do not have access to these systems.
It's a perfect storm and it is about to hit. You know the Terminator movies? They were right to be scared, only they were scared of the wrong thing. SkyNet is here, and it is trading our money for us, it's going to kill the markets.
Kill it before it kills our money.
You can't handle the truth.
From the NY Times, May 9, 2010
http://www.nytimes.com/2010/05/08/opinion/08durbin.html
"On Thursday afternoon, the Dow plunged 1,000 points within a few minutes, followed by an equally sudden recovery. We don’t know all the details about the drop, but it was almost certainly the result of computer or human error in a high-speed trading program.
Among the many arcane corners of the financial world highlighted by the Wall Street crisis, high-frequency trading — in which computers scan billions of bits of market data for trading opportunities that may exist for mere fractions of a second — has generated a surprising amount of discussion. Alongside the risk of expensive errors like what happened Thursday, critics say, these programs facilitate insider trading and overwhelm regulators’ access to critical information.
These are fair criticisms. Fortunately, they can also be easily addressed without undermining the positive role that high-frequency trading plays in the market.
Let’s start with the insider trading charge. Often, when an exchange operator receives an investor order and finds that another exchange has a better price, it will “flash” the order to a few select traders in its exchange a split second before sending it to market, giving those traders an opportunity to improve their price, too. When used properly, flashing ensures that investors trade at the best available prices.
But that hair’s breadth of time also gives high-frequency traders an opportunity to make a tidy profit off what amounts to insider information. How? Rather than improve their price, the recipient of a flash can go to the other exchange, buy up all the assets at better prices, and force the original investor to trade with them at an inferior price.
We don’t allow trading based on private knowledge of pending business deals or court rulings, and we shouldn’t allow it in high-frequency trading, either. But that doesn’t mean we should ban flashing all together. Instead, to deter abuse, anyone who gets a preview of a trade, whether by phone or flash, should be required to register with an exchange and keep records of every negotiation."
Stock markets are created to promote investors and not traders as it is happening now.
I'd like to buy homeland for our 10 million people. http://twitter.com/mahadiga
When is the congress going to stop lying to the people, this time it is a glitch that is blamed? There is no glitch, the people in power know what is wrong. The US has too much debt and you know why? Because the people in the US bully the politicians into spending all the money they have and someone in charge needs to be introduced to tough love. Give the people what they need not what they want, that is true power and will solve our money problems.
This event has persuaded me to learn more about the stock market. I know slightly more than the average American. Can anyone recommend good resources to start from? I am already reading some blogs listed here and will look at Google and Amazon to books, but I would appreciate some recommendations here too.
"We cannot allow a technological error to spook the markets and cause panic. This is unacceptable. In this day and age and with the use of such complex technology, we should be able to make sure that our financial markets are effectively monitored and investors are protected." You know... the same thing could be said about banking practices. It's easy to whine about technological errors, but when we make the same point about economic errors spooking the market and causing panic, the bankers don't like it either..
Let's put the genes back in Genesis.
The novel "Debt of Honor" by Tom Clancy, especially the chapter called 'Easter Egg' is about an event much like this one. A 'glitch' triggered by two corrected entires causes a loss of transaction data, and at the same time as the 'enemy' (in this case, Japan and other Asian investors) start selling US treasury bonds to bring down the value of the dollar and american stocks while increasing the value of the Yen. In response, the government rewinds all transactions to before the glitch was triggered and gets together with big european investors to start buying back the american trading vehicles hence shittified to increase their value, and so Jack Ryan (TM) saves the world.
The book is implausible in many places but is still an elaborate and enjoyable little drama about these events. I recommend reading it if this story intrigues you and you can tolerate the low-IQ cowboy politics.
That said, this does sound like a conspiracy. Surely there would've been a number of human as well as deterministic safeguards in place for the selling of a billion stocks instead of a million. The market was already spooked by the Greek bailout and going to lose a lot of value, and a well-timed 'computer mistake' was made to help shadow and muddle the apparent cause of some of this damage. Confidence would go down less, keeping the markets afloat somewhat better. For e-discovery purposes, the point-man who made this mistake would be made to look like he was torn to shreds by management, but would not be let go of permanently and will eventually be rewarded by whoever engineered the whole thing. A pretty good play if you ask me.
Either that, or the coke dealers of New York experimented with a new brand of baking soda to cut their product with. Technological advances happen all the time in all sorts of places in that city.